Japan and Turkey eyeing more business with each other

A new film opening in Japanese cinemas this weekend is likely to draw interest not only from movie-goers but from foreign policy pundits as well.

The DailyBrief

Must-reads from across Asia - directly to your inbox

Kainan 1890, a Japanese-Turkish production directed by Mitsutoshi Tanaka, features two historical moments in the relations between these two countries, namely the wrecking of the Ottoman frigate Ertuğrul off the Japanese coast in 1890 where more than five hundred sailors were drowned with the survivors being salvaged through the extraordinary efforts of Japanese locals, and the rescue of 215 Japanese nationals from Tehran by a Turkish Airlines team during the Iraq-Iran War in 1985.

These two moments of solidarity are celebrated by both the Japanese and the Turks, and they are deemed to be the pillars of the friendly relationship between the two countries.

The term “friendly” is used with its true meaning here, not as diplomatic jargon, because over the one century and a quarter after the going down of Ertuğrul, Japan and Turkey never faced a politically conflictual situation with each other, neither at bilateral nor at international levels.

The release of Kainan 1890 comes at a time when Japan and Turkey have initiated renewed efforts to further improve their ties through stronger economic linkages.

Japan has always had an interest in Central Asia in the Middle East, and now with the weight of China’s One Belt, One Road initiative looming large in the region, the country is looking for a fresh impetus in its engagement with this part of the world in order to balance, at least partially, Beijing’s clout.

In this respect, Turkey is not only a stable destination for Japanese trade and investment itself, but recalling the Japanese-Turkish joint economic initiatives in Central Asian countries during the 1990s, Turkey can once again be a partner for cooperation in this region.

In the meantime, Turkey is at pains to upgrade its economy through greater value added, more technology and better physical infrastructure, and it needs partners who are willing to help.

Recent disappointments such as the cancellation of the missile defense system deal with China and the spiraling down of relations with Russia after the downing of a Russian jet by Turkish fighters made it clear to policy makers in Ankara once again that long-term, value-generating and sustainable relationships in the economic realm are only possible if there already exists a stable political framework. Japan has always been a good partner in this respect, and the Turks believe that there is no reason why more can’t be done.

There is clearly increasing dialogue between the two countries, as evident in Turkish president Recep Tayyip Erdoğan’s visit to Tokyo in October this year followed a month later by the Japanese prime minister Shinzo Abe’s visit to Turkey where he coupled his participation at the G20 summit in Antalya with a series of bilateral meetings in Istanbul.

These two visits were dominated by economic issues and both of them were dotted with references to large-scale investment projects recently completed or currently being undertaken by Japanese and Turkish companies, such as Marmaray, the undersea rail tunnel crossing underneath the Bosphorus, the Izmit Bay Bridge located fifty kilometers to Istanbul, as well as the planned Sinop Nuclear Power Plant, a $22 billion project contracted to a Japanese-French consortium.

Japan is willing to increase its economic presence through more — borrowing the words of Turkish leaders — “mega projects” like the ones mentioned; and, on the other hand, Turkey needs a source of investment, which is reliable, of high quality, affordable, and more importantly, not prone to political volatility.

Within this framework, the crucial question that the Turks have in mind is how and to what extent the Japanese can contribute to their pursuit of higher technological capabilities.

Japanese corporations have been operating in Turkey since the late 1980s, and several Japanese household names, such as Toyota, Honda, Isuzu, Bridgestone, Mitsui, Sumimoto, and Marubeni, have established production facilities in Turkey through the joint ventures they formed with Turkish partners. These facilities have played a key role in utilizing Japanese technology in Turkey, particularly in the automotive industry.

Starting with late 1990s and early 2000s, the flow of investment capital from Japan to Turkey lost its pace, due to the adverse economic conditions Japan was experiencing and the failure of the business environment in Turkey to offer favorable conditions for Japanese business decision makers.

Over the past few years, however, this trend has been reversing. There emerge now greater incentives for Turkey and Japan to undertake joint projects, which in most cases have a significant technology transfer component.

The Türksat-4A satellite has been a milestone in this respect as it was produced by a Japanese company with the participation of Turkish engineers trained in Japan.

Turkish authorities have declared that Türksat-4A is “not only a satellite purchase project”, but “a project that enables Turkey to build its own satellite” and “opens the way [for Turkey and Japan] to establish a strategic partnership in space policies.”

Although the idea is yet to materialize, plans announced by the minister included collaboration with the Japan Aerospace Exploration Agency with the aim to establish the Turkish Space Agency.

In the meantime, the Turkish government’s decision in 2013 to appoint the Japanese-led consortium to build the nuclear plant in Sinop represented another key stage in relations. Despite ecological concerns, Ankara has been pursuing nuclear energy due to plans for growth in the next decade that will necessitate increased energy use.

The Sinop project requires the contracting party to train Turkish personnel, which is an efficient way for the transfer of technology and skills, and also paves the way for the establishment of a Turkish-Japanese Technology University that will include a nuclear physics program to train experts for the Sinop plant.

A document on cooperation in IT and communication technologies signed between the two countries during President Erdoğan’s visit to Tokyo is also likely to accelerate the efforts in this field.

However, a more important undertaking that is expected to create an efficient platform to build the relations on is the ongoing negotiations for an Economic Partnership Agreement (EPA) between Japan and Turkey.

The third round of negotiations was completed in September this year, and when finalized, the agreement will cover a wide range of topics including trade in goods, trade in services, investment, intellectual property rights, improvement of the business environment, government procurement, sanitary and phytosanitary measures, technical barriers to trade, electronic commerce, rules of origin, customs procedures, competition and dispute settlement.

This agreement will take Japanese-Turkish economic relations to a new level, making it possible for Japan to have better access to Turkish markets and for Turkey to have better access to Japanese technologies.

Japan and Turkey are making significant efforts to improve their business ties. While the memory of a shipwreck from more than hundred years ago will probably do little to this end, amiable relations and favorable perceptions shared by two sides, rather than political ups and downs, will surely help.

Dr. Altay Atlı is a lecturer at the Asian Studies program of Boğaziçi University in Istanbul, and a senior research associate at Turkey’s International Strategic Research Organization (USAK).